Debt ceiling deal needs to happen by June 5 to avoid default: Yellen

"If Congress fails to increase the debt limit, it would cause severe hardship to American families," Treasury Secretary Janet Yellen is warning.

As U.S. lawmakers head home for the Memorial Day long weekend, Treasury Secretary Janet Yellen extended the deadline for a deal to raise the government’s $31.4 trillion debt ceiling, but only by four days.

Originally, Yellen said the deadline was as early as June 1 to avoid a potential default but in a letter to Congress on Friday, the date was extended to June 5.

Yellen said her department would make more than $130 billion in scheduled payments in the first two days of the month, including to veterans and Social Security and Medicare recipients, but encouraged the White House and Republicans to come to an agreement “as soon as possible.”

“If Congress fails to increase the debt limit, it would cause severe hardship to American families, harm our global leadership position, and raise questions about our ability to defend our national security interests,” she wrote.

The extension comes as President Joe Biden and Republican Speaker Kevin McCarthy appeared to narrow in on a two-year budget deal that was aimed at curbing federal deficits.

The pair are hoping to strike a compromise over the weekend, but any deal would need to be a compromise as support would be needed from Republicans and Democrats to pass a divided and narrowly-controlled Congress.

Despite potential hang-ups, including over stiffer work requirements on people receiving government food stamps, both sides appeared to be optimistic that they could find a deal.

“We knew this would not be easy,” McCarthy said as he left the Capitol on Thursday.